Renewable deals decline in Europe, climb in US

Global renewable energy M&A declined nearly 32% last year, but activity in North America climbed markedly and almost matched the total value of European deals.

A total of $33.4 billion of renewable energy mergers and acquisitions (M&A) reached completion last year. The decline from the $48.8 billion total recorded the previous year reflected a declining value of deals in Europe and Asia Pacific, while masking a sharp increase in North and South America. The findings were part of financial services firm PwC’s annual Renewable Deals report. 

North America saw renewable deal volume rise 71 percent and value rise 43 percent during the year, to reach a total of $12.9 billion. This contrasted with Europe where, despite a 50 percent increase in deal volume, the value of deals fell more than 50 percent to $13 billion.

South America saw deal volumes increase 111 percent and value more than double to $3.3 billion, while in Asia Pacific deal volumes almost doubled but value fell by half to $3.5 billion.

One of the key drivers of North American activity identified by the report was energy efficiency. Globally, energy efficency deals trebled in volume and accounted for more than $3 billion of deals, or 11 percent of total renewable deal volume. The sector was dominated by activity in the US “reflecting both the potential for energy savings per capita, and renewed regulatory interest, such as new US building codes aimed at delivering a 30 percent energy saving in new builds” according to the report’s authors.

“There’s increasing consumer awareness around managing energy usage which, when supported with appropriate regulations, is creating an attractive market for energy efficiency service providers,” said Ronan O’Regan, director, renewables and cleantech, at PwC.

The report noted that, in Europe, power utilities purchases were down to one-third of previous levels, in part due to regulatory reviews in Spain, Germany, Italy and the UK. The largest deals were dominated by renewables flotations, such as the $3.4 billion spin-off of the green energy arm of Italian utility Enel.

The report also noted moves by US and French nuclear power generators and engineering firms into the wind and solar sectors as such firms sought to develop their low-carbon offerings. Such moves may be quickened by the tsunami and earthquake in Japan. “The reaction to the Japanese nuclear situation has been to take stock,” says O’Regan. “While it won’t raise a red flag to investment in nuclear, it could in the short term spur further moves by nuclear companies into renewables.”

Confidence is expressed in the overall outlook for 2011, as financing issues ease and buyer and seller price expectations become more realistic. “We expect confidence levels to remain relatively strong throughout 2011, despite regulatory uncertainty in some markets,” says the report.

According to research from InfrastructureInvestor Assets, renewable energy accounted for 15.8 percent of all infrastructure investment in 2010.